The Not-So-Pretty Reality of Coliving: Hype Meets Harsh Truth

Everyone, including me, has been singing coliving’s praises in recent times: flexible leases, built-in community, Instagrammable lounges, you name it. But amid all the hype, the coliving industry has been glossing over some serious problems. In fact, behind the utopian marketing, coliving operators worldwide have hit wall after wall. Nearly every major coliving startup of the past decade has either imploded or is struggling to stay afloat. Time to take off the rose-tinted glasses and look at why coliving isn’t as flawless a solution as it’s cracked up to be.

Regulatory Roadblocks: When City Hall Says “Not So Fast”

• Coliving may sound trendy, but many city regulations still think it’s 1950. Outdated zoning laws and housing codes are a huge buzzkill for coliving operators. These laws often don’t even recognize coliving as a category; there’s “residential,” “commercial,” etc., but where do you slot a building full of individual room rentals with shared common areas? In many places, you don’t. For example, some local governments (Paris, Barcelona, etc.) literally cap the number of unrelated adults who can live together under one roof. One city in Kansas went so far as to ban four or more roomies in a single home, effectively slamming the door on coliving arrangements.
• The result of these rules? Endless red tape for coliving developers. Parking requirements, minimum room sizes, and density limits can force coliving projects to shrink or shut down entirely. Developers who dreamed of packing efficient micro-units into expensive cities find themselves stuck meeting archaic codes that assume every resident drives an SUV and needs a big kitchen of their own.
• All this regulation drives up costs and causes planning permission nightmares, scaring off investors and slowing expansion. In short, coliving is often legally stuck in no-man’s-land, a housing model that doesn’t fit the old rules, and until laws catch up, operators will keep facing this local backlash and legal battles.

Bad Actors & Broken Promises in the Coliving Boom

• Not all coliving operators are noble social architects; some are just opportunistic landlords 2.0. The industry has seen its share of bad actors and spectacular failures that left residents in the lurch. Remember Quarters, the high-flying coliving startup backed by $300 million in funding? It collapsed virtually overnight in 2021, leaving building owners and hundreds of tenants high and dry. Quarters didn’t even bother informing many of its landlords and tenants until after it filed bankruptcy; suddenly renters couldn’t get their keys or their security deposits back, sparking frantic calls and emails to a company that had effectively ghosted them. A bankruptcy trustee called the situation “particularly poorly” handled, a nice way of saying the operators bailed on their responsibilities. And Quarters was not alone. New York-based Bedly folded in similar fashion in 2019, stranding 600+ renters and landlords with zero notice, and similarly Common, WeLive, Ollie, etc. faced the same fate. Coliving’s history is littered with such flameouts.
• Even the pioneers who didn’t vanish overnight often earned a bad rap for shoddy customer service and broken promises. Common Living, once the poster child of coliving, grew into one of the biggest operators, only to face tenant complaints about poor communication and neglect. Residents griped that management was unresponsive when things went wrong.
• In one alarming incident, a Common tenant threatened in a group chat to literally set the building on fire; tenants reported that Common’s support team failed to respond adequately or promptly. When your whole brand is supposed to be “hassle-free living,” ignoring security threats is not a good look. These kinds of stories underscore how some coliving companies have acted like anything but the caring community builders they claim to be.
• In practice, a few bad operators tarnish the industry, cutting corners on safety, skimping on maintenance, or just going dark on tenants who need help. The coliving concept is only as good as the people running it, and in too many cases the operators have proven themselves to be unreliable or even downright negligent.

Community Doesn’t Scale: The Human Factor Nightmare

• Coliving’s secret sauce is supposed to be “community.” Live with like-minded people, make friends, and do Sunday potlucks, that’s the pitch. And yes, a single well-run coliving house can feel like magic. But here’s the inconvenient reality: community doesn’t scale. You can’t bottle the vibe of one great house and pour it into a hundred buildings, at least not without things going sour. Almost every attempt to franchise the communal living experience has hit the same wall: the magic is fragile and highly dependent on the people and context.
• Coliving startups found this out the hard way. They expanded rapidly, opening dozens of locations, only to discover that maintaining cohesive, positive communities across all of them was exponentially harder than they thought. One troublemaker roommate or one apathetic property manager can wreck the atmosphere in a coliving home, leading to drama, turnover, and bad reviews. As one industry insider put it, “Cohesion is hard to deliver consistently, and ‘bad agents’ in a house can erode the model quickly.” Unlike a hotel or a standard apartment, a coliving space is supposed to be a social environment, which means when the social dynamics break down, the whole product falls apart.
• Scaling up community is not like scaling servers or software. Coliving companies tried to standardize and centralize the communal experience: pizza nights every Thursday! roommate matching algorithms! But genuine community resists that kind of commodification. The result was often forced, phony “cultures” that residents saw through. Many early coliving teams also made the mistake of hiring enthusiastic young staff who loved the idea of community but had zero experience in actually managing properties and people.
• As one commentator quipped, interest in community is a vibe, not a skillset. Running a network of communal homes requires serious operational chops: conflict resolution, maintenance, event programming, you name it and many startups simply didn’t have the personnel with the right expertise. It’s a lot easier to put “we build community” on a slide deck than to actually foster a healthy community at scale in real life.

The Money Pit: Funding and Business Models on Thin Ice

• If coliving is such a dream, why are its pioneers dropping like flies? Follow the money (or lack thereof). The coliving business model has proven to be a financial minefield. On paper, it promised great returns: cram more paying tenants into a property and charge a premium for the “all-inclusive” convenience. Indeed, coliving operators often boasted that they could get higher rent per square foot than traditional landlords. But in practice, many startups found that the economics just didn’t pan out. They underestimated costs and overestimated demand, a fatal combo.
• Let’s talk costs first. Outfitting and operating coliving spaces is expensive. You can’t just split a big house or building into tiny bedrooms without major investment. Retrofitting buildings to create more bedrooms, add bathrooms, and meet safety codes turned out to be far more costly and complex than the founders expected. (WeWork learned this with its ill-fated WeLive project, it projected tens of thousands of residents, but after two buildings hemorrhaged money due to high buildout costs and low occupancy, the plug was pulled.)
• Unlike office co-working spaces, residential conversions face stricter building codes and inflexible layouts, which drive costs through the roof. Coliving design often requires custom architecture to truly work well, and that means heavy CapEx that erodes the profit margins.
• Meanwhile, operating expenses for coliving are higher than a normal rental too; think regular cleaning, stocked supplies, community events, and the fact that tenants turn over more frequently (meaning more marketing and wear-and-tear). Many coliving providers found that after paying lease costs or mortgages, plus all those services and amenities, their “higher rent per square foot” wasn’t covering the bills. As one analysis noted bluntly, “costs were higher, and net occupancy lower” than projections, putting serious pressure on debt repayments and cash flow. In other words, the spreadsheets were too rosy from the start.
• Now combine that with demand and pricing issues. Coliving’s target market (young renters, often in expensive cities) is extremely price-sensitive. Sure, plenty of people are interested in flexible, furnished living, but only up to a point. It turns out a lot of folks would rather save money living in a normal shared apartment than pay a premium for a glorified dorm room, free WiFi notwithstanding. Coliving beds have been known to rent for $1,500, $2,000, or even $3,000+ a month in some cities. That’s often more than simply renting a room in a regular apartment with roommates. The convenience of one bill and a hip furniture package wasn’t enough for many renters to justify the markup. Coliving companies, chasing “luxury community” vibes, sometimes overshot what their customer base could afford.
• In plain terms: If your product is supposed to be affordable housing, you can’t charge luxury prices and expect it to work. Many coliving units ended up sitting vacant or lowering rents, undermining the whole financial model.

Sky-High Marketing and Turnover Costs

• Another ugly secret of coliving operations is the sky-high marketing cost and tenant churn. Coliving isn’t a “build it and they will come” field yet; operators have to hustle to fill beds. Each new city or property means finding hundreds of residents and convincing them to try this novel living style. That gets expensive. One CEO I worked with noted that expanding into a new city isn’t just opening a building; you have to set up local staff, marketing campaigns, partnerships, community events, you name it. Do that in 10 or 15 cities at once (as venture-funded startups tried), and you’re burning cash on marketing and ops in a hurry.
• Worse, the typical coliving resident doesn’t stay for years on end. These spaces attract students, young professionals, and people in transition; many sign up for a few months or maybe a year. High turnover is baked into the model (some companies even touted flexibility as a selling point). But short stays mean a constant need to find new tenants, which means constant marketing spend; digital ads, referral bonuses, and slick Instagram content, plus the manpower to give tours and handle onboarding.
• The cost of acquiring a customer for a coliving unit can eat up a big chunk of that customer’s rent. If a tenant leaves after 6 months, the operator is back on the treadmill trying to fill the room again immediately. This cyclical churn drives up operating costs and makes it hard to ever reach stable occupancy. It’s a far cry from a traditional landlord who might have a two-year lease with each renter.
• Coliving companies learned that “growing fast” on the demand side wasn’t cheap; they were essentially reselling the same room multiple times a year. Without endless venture capital to fuel this machine, the model quickly breaks down if you dont run it tightly.

Venture Capital Pressure Cooker

• Speaking of venture capital: it has been both a blessing and a curse for coliving. Yes, VC dollars allowed coliving startups to grow quickly, but they also set unrealistic growth expectations that don’t mesh well with the realities of real estate. Unlike a software startup, you can’t scale housing to 15 cities in a year without massive capital investment and local complexity. Yet investors demanded hypergrowth.
• Common, for example, raised over $110 million in VC and expanded to 12+ cities and even overseas. The result? An overextended empire that ultimately couldn’t sustain itself, Common filed for bankruptcy in 2024, after merging with another startup in a last-ditch effort to stay alive. Its CEO admitted that the rapid expansion (to places like Nashville, Ottawa, and Chicago far from its home base) made the company far less agile and far more cash-hungry than it should have been. Every new market meant new leases, new renovations, and new staff—i.e., new costs all racing ahead of actual proven demand.
• Industry observers have pointed out that venture funding and real estate can be a toxic mix for this reason. VC investors typically expect a startup to “blitzscale,” double, tripling, or quadruple growth in short order, to dominate a market. But housing is a slow asset class; projects take time, local knowledge, and steady occupancy to be successful.
• “Venture capital is not working very well with real estate,” said one coliving CEO flatly, noting that rapid growth in 10+ markets is “very difficult to do in real estate.” What happened instead is that coliving companies grew faster than their balance sheets could handle, burning cash without hitting profitability. Several collapsed despite having raised piles of money, because that money simply fueled unsustainable expansion and overhead.
• In essence, the VC pressure cooker pushed coliving startups to scale at an “Uber” pace in a business that fundamentally moves at a snail’s pace. When the music stopped, many found they had built a house of cards, and the cards were on fire.

Déjà Vu: The Same Failures Everywhere

If all these issues sound like a laundry list, it’s because coliving operators around the world keep running into the same problems, over and over. Here are the most common reasons coliving ventures crash and burn: a pattern seen from the U.S. to Europe to Asia:

• Overoptimistic Financials: Many coliving startups misjudged the numbers, costs ballooned, and occupancy never hit the lofty targets, crushing their margins. High-end amenities and all-inclusive bills sounded great until the bills came due and revenue fell short.
  
• Operational Inexperience: Passion for community isn’t enough to run housing. Companies hired teams with tech or social backgrounds but little real estate or hospitality skill. Rookie mistakes in property management and customer service piled up.
  
• Fragile Community Dynamics: It only takes one bad roommate or a neglectful manager to poison a coliving house. Maintaining a healthy community at scale proved incredibly hard. The “human factor” doesn’t replicate like software.
  
• Regulatory and Legal Hurdles: From zoning laws banning group living to strict safety codes, local regulations frequently stymied coliving projects. Fighting city hall drained time and money, deterring expansion.
  
• Unsustainable Lease Models: Many operators didn’t own properties but master-leased them with long contracts, essentially WeWork-style leasing. When rooms went vacant or recessions hit, those lease obligations became deadly (as WeWork’s own coliving attempt, WeLive, found out). Long leases + short-term tenants = big risk.
  
• High Churn and Marketing Costs: As discussed, short tenant stay lengths meant coliving companies were perpetually spending on marketing to fill beds. Customer acquisition costs ate away profits, especially when expansion was pushed too far, too fast.

Time and again, coliving startups across different markets fell victim to these issues. Berlin-based Quarters, New York’s Common, London’s The Collective, San Francisco’s Starcity, India’s Stanza Living, and the list goes on. All hit variations of these same problems. Some managed to hang on longer than others, but the fundamental flaws in the model have been exposed repeatedly.

Coliving’s Reality Check

None of this is to say that coliving is impossible or that the concept is doomed to fail everywhere. In fact, the idea itself, shared living to save money and find community, addresses real needs in expensive, isolating cities. The demand for more affordable, flexible housing is very real. But the starry-eyed optimism around coliving needs a reality check. It’s not a cure-all for the housing crisis, and it’s certainly not an easy business to run. The past few years have proven that if you try to scale coliving like a Silicon Valley app, you’re in for a world of pain.

So next time you hear a coliving startup brag about “reinventing how millennials live,” remember the other side of the story. Remember that behind the hip branding, there might be zoning officials ready to shut it down, tenants waiting on a support ticket about a broken lock, investors fretting over cash burn, and a frazzled operator realizing that managing 50 communal homes isn’t as simple as managing one.

Coliving, for all its conceptual appeal, has a long list of harsh realities to contend with. Until the industry confronts these issues head-on, from building better business models to cooperating with regulators and truly prioritizing resident well-being, all the hype in the world won’t paper over the cracks. In the meantime, consider this a friendly contrarian reminder: coliving may look shiny and new, but it comes with baggage that no amount of millennial pink paint can hide.